Europe needs radical plan to halt deindustrialisation

The European Commission is being urged to implement a radical new plan that will halt a process of deindustrialisation that could reduce steel demand for years to come. 

Eurofer wants the Commission’s proposed Clean Industrial Deal – pledged by the recently re-elected President of the European Commission, Ursula von der Leyen – to include measures in EU industrial, energy and trade policies. It described such action as the “last chance” to ensure Europe’s prosperity, shielding industry from low-cost imports driven by unfair trade practices, overcapacity and lower climate ambitions. 

• This content first appeared in the September edition of MEPS's European Steel Review. The monthly report features steel prices, price indices, market commentaries and forecasts from across the region. Contact MEPS for details of how to subscribe.

MEPS respondents in Europe have reported no uptick in demand following the traditionally quiet summer period. Buyers are holding back from purchases as prices continue to decline. Few now anticipate a significant improvement in market sentiment until spring 2025. 

Eurofer recently decreased its expectations for EU apparent steel consumption growth for 2024 from 3.2% to 1.4%, with an expected rise of 127 million tonnes. It also revised down its 2025 forecast from 5.6% to 4.1% growth. 

Data provided by Factset that eurozone GDP will increase by 0.7% this year. This compares to 4.8% in China and 2.4% in the United States. It forecasts that eurozone growth will be 1.4% in 2025 and 2026, before falling to 1.1% in 2027 and 2028. 

Recent developments in Germany have raised concerns about the long-term outlook for steel demand and Europe’s wider economy. In early September, Volkswagen announced that it was considering the first German plant closures in its 87-year history. The carmaker needs to save EUR10bn by 2026. Its announcement follows site closures and staff redundancies at German petrochemical business BASF, automotive technology specialist Bosch and steelmaker Thyssenkrupp. 

The need to level the playing field 

China’s overcapacity is placing further pressure on Europe’s steel market. The National Bureau of Statistics of China reported that finished steel production rose by 0.4% to 925.7m tonnes in the first seven months of 2024. However, exports rose by 20.6%, to 58.5m tonnes, due to the country’s weak domestic market. As Chinese steel enters the Asian market, low-cost exports from the region are placing downward pressure on European steel prices. 

The EU produced only 126m tonnes of crude steel in 2023, the lowest level ever recorded. Worldsteel data shows that production had risen by 1.5%, to 78m tonnes, year-to-date at the end of July. 

Eurofer wants the findings of a recent report commissioned by the European Commission, entitled ‘The future of European competitiveness’, to be included in a Clean Industrial Deal. It hopes that the measures will level the playing field for European steelmakers and the wider economy. 

The report proposes close monitoring of CBAM to avoid circumvention, along with the extension of CBAM to downstream sectors. It also describes a need for “urgent measures” to lower energy prices to make EU industry more competitive with the United States and China. 

Furthermore, finance raised through ETS allowances should be earmarked to support European businesses implementing decarbonisation measures, the report says. 

Limited effect of ECB rate cut 

As the European Commission formulates its plan for economic recovery, the European Central Bank’s (ECB) 0.25 percentage point interest rate cut is unlikely to improve steel demand in the near term. 

The reduced cost of finance may encourage investment in some larger projects. However, the effect of this is likely to be minimal – without further cuts – and is unlikely to be felt for several months. 

Although Eurofer is attempting to inject urgency into the Commission’s efforts to fix Europe’s economic issues, any market recovery remains unlikely in the near term.